Apyx Medical Corp

Previous wording

We are an advanced energy technology company with a passion for elevating people’s lives through innovative products, including our Helium Plasma Technology products marketed and sold as Renuvion® in the cosmetic surgery market and J-Plasma® in the hospital surgical market. Renuvion and J-Plasma offer surgeons a unique ability to provide controlled heat to tissue to achieve their desired results. We also leverage our deep expertise and decades of experience in unique waveforms through OEM agreements with other medical device manufacturers.

Current wording

We are an advanced energy technology company with a passion for elevating people’s lives through innovative products, including our Helium Plasma Platform Technology products marketed and sold as Renuvion® in the cosmetic surgery market and J-Plasma® in the hospital surgical market. Renuvion and J-Plasma offer surgeons a unique ability to provide controlled heat to tissue to achieve their desired results. We also leverage our deep expertise and decades of experience in unique waveforms through OEM agreements with other medical device manufacturers.

Previous wording

Total revenue decreased by 15.6%, or approximately $1.9 million, for the three months ended March 31, 2024 when compared with the three months ended March 31, 2023. Advanced Energy segment sales decreased 23.1%, or approximately $2.2 million, for thethree months ended March 31, 2024 when compared with the three months ended March 31, 2023. The Advanced Energy sales decrease was driven by domestic sales, where we had decreases in the sales of our generators as a result of economic uncertainty in the capital equipment market that is being experienced in the aesthetic space, as well as a decrease in single-use handpieces over the same period in 2023.

Current wording

Advanced Energy segment sales decreased 16.7%, or approximately$2.0 million, for the three months ended June 30, 2024 when compared with the three months ended June 30, 2023. Advanced Energy segment sales decreased 19.6%, or approximately$4.2 million, for thesix months ended June 30, 2024 when compared with thesix months ended June 30, 2023. The Advanced Energy sales decrease was driven by lower sales of our generators in both domestic and some international markets as a result of economic uncertainty in the capital equipment market that is being experienced in the aesthetic space. These decreases were partially offset by increased volume of single-use handpieces globally.

Previous wording

OEM segment sales increased 13.8%, or approximately$0.3 million, for thethree months ended March 31, 2024 when compared with thethree months ended March 31, 2023. The increase in OEM sales was due to increases in sales volume to Symmetry Surgical under our 10-year generator manufacturing and supply agreement.

Current wording

OEM segment sales increased 29.0%, or approximately$0.5 million, for thethree months ended June 30, 2024 when compared with thethree months ended June 30, 2023. OEM segment sales increased 20.4%, or approximately $0.9 million, for the six months ended June 30, 2024 when compared with the six months ended June 30, 2023. The increase in OEM sales was due to increases in sales volume to existing customers, including Symmetry Surgical under our 10-year generator manufacturing and supply agreement.

Previous wording

International sales represented approximately 31.9% of total revenues for thethree months ended March 31, 2024, as compared with 26.9% of total revenues for the same prior year period. Management estimates our products have been sold in more than 60 countries through local dealers coordinated by sales and marketing personnel through our facilities in Clearwater, Florida and Sofia, Bulgaria.

Current wording

International sales represented approximately 28.5% and 30.0% of total revenues for the three andsix months ended June 30, 2024, respectively, as compared with 25.3% and 26.1% of total revenues for the same period in the prior year. Management estimates our products have been sold in more than 60 countries through local dealers coordinated by sales and marketing personnel through our facilities in Clearwater, Florida and Sofia, Bulgaria.

Previous wording

The decrease in gross profit margins for thethree months ended March 31, 2024 from the prior year periodis primarily attributable to changes in the sales mix between our two segments, with our OEM segment comprising a higher percentage of total sales and geographic mix within our Advanced Energy segment, with international sales comprising a higher percentage of total sales.

Current wording

Gross profit for thesix months ended June 30, 2024, decreased (20.2)% to $13.4 million, compared to $16.9 million for the same period in the prior year. Gross margin for thesix months ended June 30, 2024, was 60.0%, compared to 65.5% for the same period in 2023. The decrease in gross profit margins for the six months ended June 30, 2024 from the prior year period is primarily attributable to changes in the sales mix between our two segments, with our OEM segment comprising a higher percentage of total sales and geographic mix within our Advanced Energy segment, with international sales comprising a higher percentage of total sales.

Previous wording

Research and development expenses increased 9.9% for the three months ended March 31, 2024, primarily due to higher spending on our product development initiatives and clinical studies ($0.1 million).

Current wording

Research and development expenses increased 4.9% for the three months ended June 30, 2024, primarily due to higher spending on our product development initiatives and clinical studies ($0.1 million).

Previous wording

During the three months ended March 31, 2024, salaries and related expenses decreased 4.5%, primarily driven by lower stock based compensation expense ($0.1 million) and temporary labor expenses ($0.1 million).

Current wording

During the three months ended June 30, 2024, salaries and related expenses decreased (4.0)%, primarily driven by lower stock based compensation expense ($0.2 million) and temporary labor expenses ($0.1 million). These decreases were partially offset by an increase in salaries and related taxes and benefits ($0.1 million).

Previous wording

During the three months ended March 31, 2024, selling, general and administrative expense decreased 6.8%, primarily driven by decreases in commissions ($0.7 million) and travel and entertainment expense ($0.1 million). These decreases were partially offset by increases inregulatory and regulatory audit costs ($0.2 million), building lease expense ($0.1 million) andbad debt expenses ($0.1 million).

Current wording

During the three months ended June 30, 2024, selling, general and administrative expense decreased (10.0)%, primarily driven by decreases in commissions ($0.7 million), advertising expense, including trade show fees and related costs ($0.2 million) and bad debt expense ($0.1 million). These decreases were partially offset by higher meeting and training costs ($0.4 million) and travel expense ($0.1 million).

Previous wording

Interest income increased approximately $0.4 million for the three months ended March 31, 2024, compared with same period in the prior year. This increase is due to a higher average balance in ourinvestments in money market funds and U.S. Treasury securities included in cash and cash equivalents.

Current wording

Interest income increased approximately$0.3 million and$0.7 million, respectively, for the three and six months ended June 30, 2024, when compared with the same periods the prior year. These increases are due to a higher average balance in ourinvestments in money market funds and U.S. Treasury securities included in cash and cash equivalents.

Previous wording

Interest expense increased approximately $1.2 million for the three months ended March 31, 2024, compared with same period in the prior year. This increase is due to cash and noncash interest expense on the Perceptive Credit Agreement.

Current wording

Interest expense increased approximately$0.9 million and$2.0 million, respectively, for the three and six months ended June 30, 2024, when compared with the same periods in the prior year. These increases are due to cash and noncash interest expense on the Perceptive Credit Agreement.

Previous wording

Our income tax expense (benefit) was approximately $53,000 and $(2,267,000) with effective tax rates of (0.7)% and 39.1% for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, the effective rate differs from the statutory rate primarily due to the full valuation allowance recorded on the NOL and net deferred tax assets generated during the period. For the three months ended March 31, 2023, the effective rate differs from the statutory rate primarily due to the reversal of our liability for uncertain tax positions, including accrued interest and penalties, of approximately $2.1 million which were sustained upon the completion in January 2023 of the IRS examination of our 2018 through 2020 income tax returns, partially offset by a valuation allowance on our NOL and net deferred tax assets generated during the period.

Current wording

Our income tax expense (benefit) was approximately $103,000 and $(2,201,000) with effective tax rates of (0.7)% and 32.6% for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, the effective rate differs from the statutory rate primarily due to the full valuation allowance recorded on the NOL and net deferred tax assets generated during the period. For the six months ended June 30, 2023, the effective rate differs from the statutory rate primarily due to the reversal of the Company’s liability for uncertain tax positions, including accrued interest and penalties of approximately $2.1 million which were sustained upon the completion in January 2023 of the IRS examination of the Company's 2018 through 2020 income tax returns, partially offset by a valuation allowance on the NOL and net deferred tax assets generated during the period.

Previous wording

At March 31, 2024, we had approximately$37.3 million in cash and cash equivalents as compared to approximately$43.7 million in cash and cash equivalents at December 31, 2023. Our working capital at March 31, 2024 was approximately$51.5 million compared with $57.6 million at December 31, 2023. The decrease in working capital at March 31, 2024 was primarily due to the net loss incurred in the first quarter of 2024, excluding non-cash activity, comprised primarily of stock-based compensation.

Current wording

At June 30, 2024, we had approximately$32.7 million in cash and cash equivalents as compared to approximately$43.7 million in cash and cash equivalents at December 31, 2023. Our working capital at June 30, 2024 was approximately $46.0 million compared with $57.6 million at December 31, 2023.

Previous wording

For the three months ended March 31, 2024, net cash used in operating activities was approximately$6.3 million, which principally funded our loss from operations of $6.6 million, compared with net cash used in operating activities of approximately $1.9 million in 2023. The increase in cash used in operations is primarily due to the payment of accrued bonuses in the first quarter of 2024, no bonuses were paid in 2023, and the increase in operating loss driven by lower Advanced Energy sales compared to the same period in the prior year.

Current wording

For thesix months ended June 30, 2024, net cash used in operating activities was approximately$10.7 million, which principally funded our loss from operations of $12.2 million, compared with net cash used in operating activities of approximately $6.7 million in the six months ended June 30, 2023. The increase in cash used in operations is primarily due to the payment of accrued bonuses in the first quarter of 2024, no bonuses were paid in 2023, and the increase in operating loss driven by lower Advanced Energy sales compared to the same period in the prior year. These decreases were partially offset by improvements in our accounts receivable and inventory positions.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2023 was$8.1 million related to proceeds received upon the execution of the prior debt agreement ($9.9 million) less debt issuance costs incurred in the transaction ($1.8 million). This agreement was paid off in November 2023 with proceeds from the Perceptive Credit Agreement.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2023 was$8.1 million related to proceeds received upon the execution of the prior debt agreement ($9.9 million) less debt issuance costs incurred in the transaction ($1.8 million). This prior debt was paid off in November 2023 with proceeds from the Perceptive Credit Agreement.

Previous wording

We have incurred recurring net losses and cash outflows from operations and we anticipate that losses will continue in the near term. We plan to continue to fund our operations and capital funding needs through existing cash, sales of our products and if necessary additional equity and/or debt financing. However, we cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our existing stockholders. The sale of additional equity would result in dilution to our stockholders. Incurring additional debt financing would result in further debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our sales, marketing and product development. Any of these actions could harm our business, results of operations and prospects.

Current wording

We have incurred recurring net losses and cash outflows from operations and we anticipate that losses will continue in the near term. We plan to continue to fund our operations and capital funding needs through existing cash, sales of our products and if necessary additional equity and/or debt financing. However, we cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms acceptable to us. The sale of additional equity would result in dilution to our stockholders. Incurring additional debt financing would result in further debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our sales, marketing and product development. Any of these actions could harm our business, results of operations and prospects.

Previous wording

At March 31, 2024, we had purchase commitments for inventories totaling approximately$2.7 million, substantially all of which is expected to be purchased in the next twelve months.

Current wording

At June 30, 2024, we had purchase commitments totaling approximately$3.3 million, substantially all of which is expected to be purchased within the next twelve months.

Previous wording

We maintain a reserve for uncollectible accounts receivable. When evaluating the adequacy of the allowance for doubtful accounts, we analyze historical bad debt experience, the composition of outstanding receivables by customer class, and the age of outstanding balances, and we make estimates in connection with establishing the allowance for doubtful accounts, including the expected impacts of changes in the operating environment and other trends. Changes in estimates are reflected in the period they are made. If the financial condition of our customers deteriorates, resulting in an inability to make payments, additional allowances may be required.

Current wording

We maintain a reserve for uncollectible accounts receivable. When evaluating the adequacy of the allowance for credit losses, we analyze historical bad debt experience, the composition of outstanding receivables by customer class, and the age of outstanding balances, and we make estimates in connection with establishing the allowance for credit losses, including the expected impacts of changes in the operating environment and other trends. Changes in estimates are reflected in the period they are made. If the financial condition of our customers deteriorates, resulting in an inability to make payments, additional allowances may be required.

Previous wording

See Note 2 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of the Quarterly Report onfrom 10-Q.

Current wording

See Note 2 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.